New Study Shows Consumers Fail to Distinguish Between Licensing Agreements and Seals of Approval

By Jeff HannaOctober 20, 2009

Are consumers being unintentionally misled by some corporate social-responsibility campaigns? When a product is linked with a particular nonprofit organization in branding and advertising, do consumers assume that this represents a product endorsement?

According to a new study published in the fall 2009 issue of the Journal of Advertising, the answers are yes and yes.

Co-authored by Washington and Lee University business administration professor Amanda Bower and Texas Christian University marketing professor Stacy Landreth, the study examined two common types of corporate social responsibility, or CSR, initiatives – licensing agreements and cause-related marketing.

In the case of licensing agreements, a nonprofit lends its name and logo to a company to use in its own advertising in exchange for a donation. Cause-related marketing, on the other hand, involves a firm making a donation to the nonprofit based on some type of behavior by consumers – saving yogurt container lids, for instance.

Bower and Landreth’s research concluded that consumers appeared to perceive a licensing agreement between a company and a nonprofit as constituting an endorsement equal to an explicit seal of approval. Such seals of approval are based on testing and meeting standards from an endorsing agency.

“What we determined is that a licensed CSR initiative in an advertisement – for instance, the use of the Heart Truth logo and its famous red dress – is viewed by consumers as if the nonprofit has done something more than provided its logo in return for a donation,” said Bower. “In this case, Coca-Cola’s use of the logo is not supposed to indicate that the nonprofit vouches for the product as being good for your heart or better for your heart than some comparable product.”

Yet, Bower said, the study indicated that consumers understand the presence of the nonprofit’s logo on such products as doing

“Despite an asterisk indicating a disclaimer on the side of a bottle or indicating no endorsement, our research suggests that consumers may come away believing that an endorsement is implied,” she said. “Similarly, the ‘Save Lids to Save Lives’ Yoplait campaign might suggest to consumers that the Susan G. Komen Foundation has endorsed the yogurt. In fact, Komen endorses no brands. The potential for consumers to infer something inaccurate is pretty substantial.

“Licensing arrangements are, from a consumer’s standpoint, completely indistinguishable from a seal of approval.”

In addition, the study found that consumers who are most dedicated to a nonprofit’s cause may also be among those most frequently misled by these CSR initiatives.

Bower emphasizes that the research is not dealing with strategy, and the results are not meant to suggest that that any brands are intentionally trying to deceive consumers through the use of these initiatives. “We aren’t speaking about intention,” she said. “Our research is limited to consumer misperceptions of those associations, not the intention behind them.”